Online bookstore Booktopia expects textbooks to make up roughly one third of its total sales going forward after acquiring the failed University Co-Operative Bookshop business on Friday.
Prior to the purchase, textbooks made up about a quarter of Booktopia’s sales, reflecting both the under-appreciated size of the textbook market and the online retailer’s share of it.
“A lot of people don’t realise Booktopia was already the largest tertiary textbook retailer in Australia. We were bigger than Co-Op,” Tony Nash, Booktopia’s co-founder and CEO, told Inside Retail.
“It was not an acquisition [to get] into a market we weren’t in already.”
Nash did not disclose how much Booktopia paid for the Co-Op’s website, some software and customer data (the acquisition did not include information about the bookshop’s two million members), but confirmed the transaction would help the company to boost its revenue from $131 million in FY19 to $175 million this calendar year.
“A bit boring, but we love it”
Educational books account for just under a quarter of Australia’s $1.4 billion book publishing industry, according to IBISWorld. While this segment traditionally has enjoyed higher margins and steady sales than the industry as a whole, the shift to digital content in recent years has seen demand for textbooks fall slightly.
When the Co-Op went into administration last year, one of the reasons it gave was the “collapse” of over-the-counter textbook sales.
Nash agrees that the Co-Op struggled to compete with online retailers like Booktopia on price, but disputes the narrative that textbook sales are falling.
“The biggest publishers in the world are academic publishers. It’s not Penguin or Random House, it’s Pearson and Thomson Reuters, but it’s not sexy to talk about the new best selling book in international law like it is [to talk about] a new crime thriller,” he said.
“It’s a bit boring, but we love it because it sells. It’s not going to disappear.”
“They couldn’t compete”
However, textbooks alone were not enough to save the Co-Op. The bookshop, which was started by students at the University of Sydney in 1958, had survived for decades on a membership model, where customers paid a $25 fee to receive discounts on textbooks and other products for life.
But the rise of e-commerce saw online retailers like Booktopia able to use their scale and low overheads to offer even more competitive prices, not to mention faster shipping and popular payment methods like buy now pay later.
When the company that owned the Co-Op bookshop bought Australian Geographic (later renamed Curious Planet) in 2016, it turned its focus to the chain selling science and education-based games, toys and gifts.
“They definitely prioritised Australian Geographic over the Co-Op, and it was sensible for them [to do so] because they couldn’t compete in the academic textbook arena,” Nash said.
“They also had a lot of debt that couldn’t be serviced in the end, and the physical retail landscape is tricky right now. The rents are high and there are fewer people walking through the store – you need to have a defensive approach.”
Lifeline for employees
Booktopia did not purchase the Co-Op’s 30+ bookstores or its remaining inventory as part of the acquisition.
Instead, the administrators will operate the stores for a period of up to two months to maximise returns for creditors and ensure an orderly transition to Booktopia during the first semester of the University year.
The Co-Op website has already been redirected to Booktopia. Nash had originally planned to keep the Co-Op website running and simply service the online orders through Booktopia, but realised during the due diligence process that, as a regular business, he could not legally do so.
Nash does plan to employ as many former Co-Op employees as possible as territory managers at Booktopia, a new position that has been created within its three-year-old book distribution business. He said it was too soon to say how many of the Co-Op’s nearly 200 employees would be coming on board.
This article was first published by Inside Retail.